Problem 1: The market for hog hats is competitive and demand is given by P = 75 - Q while supply is given by P = 15 + 2Q. What are the equilibrium price and quantity in this market?
Problem 2: Calculate the elasticity of demand at a price of 50. Give an economic interpretation to your answer. Is demand elastic, unit elastic or inelastic at this price?
Problem 3: To enable more students to wear hog hats to games, the UA decides to give hog hat producers a subsidy of $9 per unit. What price will consumer's pay and how many hog hats will they buy? How much will the UA spend on the subsidy? What will be the change in producer surplus?